150 family homes were built in NJ near a hazardous waste dump site. The landfill was not originally authorized to receive large chemical, hazardous waste but did receive such, which were also said to catch fire from time to time. Government conducted tests to show that nearly half of the hazardous waste was submerged in ground water. Other waste was sent down stream and eventually ended up in various lakes. Moreover, methane gas leaked from the site and plaintiffs were exposed to such leakage. The EPA recommended that the site become a “superfund” clean up site. Plaintiffs allege that developers knew about the landfill and its hazardous nature. Plaintiffs sued the developer and their companies, alleging fraud and negligent misrepresentation. In 1980, the EPA warned through a report that “The proposed housing development on land adjacent to the site has all the potential of developing into a future Love Canal if construction is permitted.” Defendant’s marketing firmed advised they disclose the existence of the landfill, but they refused and instead followed their policy of non-disclosure.
Whether a builder-developer of new homes and the brokers marketing those homes have a (common law) duty to disclose to prospective buyers that the homes have been constructed near an abandoned hazardous-waste dump.
“The principle of caveat emptor dictates that in the absence of express agreement, a seller is not liable to the buyer or others for the condition of the land existing at the time of transfer.”
“Relief may be granted to one contractual party where the other suppresses facts that he or she is bound in conscience and duty to disclose to the other party.”
Yes, there is a common law duty. Remanded for jury trial. There is no relevant legislation on NJ’s books, so the court must adopt common law. The court holds California as an appropriate model for common law – a seller of real estate would be liable for nondisclosure of on-site defective conditions if those conditions were known to them and unknown and not readily observable by the buyer. The court believes that the principle shaping the discard of caveat emptor is unequal bargaining powers; and they examine this case through that lens.
Caveat emptor no longer applies to leaseholds in a modern day context. Caveat emptor developed when the buyer and seller were in an equal bargaining position in the past. Today, “buyers of mass produced development homes are not on an equal footing with the builder vendors and are no more able to protect themselves in the deed than are automobile purchasers in a position to protect themselves in a bill of sale.”
Here, the court holds that a seller is liable for non-disclosure of off-site hazards. The court argues that sellers and brokers in this situation enjoy much greater information and bargaining power in the deals. The court writes that a developer is liable for non-disclosure of such conditions if “the existence of those conditions is of sufficient materiality to affect the habitability, use, or enjoyment of the property and, therefore render the property substantially less desirable or valuable to the objectively reasonable buyer.”